Exploring Drivers of Medicaid Trend

Mar 11, 2015
A look at the trends driving prescription drug costs and best practices for Medicaid plans to align patient care and benefit affordability.
  • Medicaid
  • Diabetes
  • Hepatitis C
  • HIV
  • Mutiple Sclerosis
  • Pain

What drove the dramatic 10.2% increase Medicaid drug spending in 2014? Simply put – the availability of new high-priced hepatitis C therapies, according to data published in the 2014 Express Scripts Drug Trend Report.

One in five Americans with chronic hepatitis C receive state-funded healthcare through Medicaid or the prison system, so the burden of paying for the cost of hepatitis C treatment regimens falls disproportionately to state budgets. And, with tight state budgets, we are seeing managed care plans being forced to shoulder these costs.

Per-member-per-year (PMPY) spend for this category among Medicaid plan sponsors rose 321.8% – the largest drug trend for any single therapy class – driven by a 317.2% increase in unit cost. Hepatitis C medications are responsible for 65% of the total increase in 2014 specialty spend.

Overall, we saw a 10.2% year-over-year increase in drug spend for Medicaid plans. This increase was due primarily to a 10.7% increase in unit cost while utilization was marginally negative at -0.5%. The 10.7% increase in unit cost was due almost entirely to increases in specialty unit cost.

Components of Medicaid Trend 2014 

Brand Price Inflation Impacts Traditional Drug Trend

When we look at traditional drug trend – namely utilization and unit cost of medications for chronic conditions, we see an overall decrease in utilization of -0.5%. We attribute this decrease to the influx of new, adult beneficiaries less likely to use medications for chronic conditions. This increase in new, adult beneficiaries is likely a direct result of the additional 8.7 million Americans added to Medicaid enrollment due to the Affordable Care Act, which also brought the total number of Medicaid beneficiaries nationwide to 67.9 million. Specifically, we saw the number of beneficiaries over age 19 grow almost 10% from 2013 to 2014.

Traditional overall drug trend increased 2.8% – far below the 6.4% increase seen in both the commercially-insured and Medicare populations. Overall, the top 10 traditional therapy classes accounted for 70.6% of traditional drug trend.

Components of Trend for the Top 10 Medicaid Traditional Classes Ranked 2014 PMPY Spend 

When looking at individual drug classes, we see that for the second consecutive year, diabetes was the most expensive traditional therapy class, making up 16.6% of Medicaid traditional drug spend and 12% of total Medicaid drug spend. Price inflation for brand name insulin therapies, such as Lantus® (insulin glargine injection) and Humalog® (insulin lispro injection), contributed heavily to the 17.0% increase in unit cost for diabetes treatments.

Top 10 Medicaid Traditional Therapy Drugs Ranked 2014 PMPY Spend 

Price inflation also explains why the antipsychotic Abilify® (aripiprazole) is the costliest traditional medication among Medicaid beneficiaries. Total trend increased 6% for Abilify, with the 11.3% decrease in utilization offset by 17.2% increase in unit cost, likely in anticipation of the drug’s upcoming patent expiration in April 2015. The pain and inflammation therapy class, which includes medications such as opioids and naproxen, and saw a 9.1% increase in spending in 2014. Market dynamics in 2014 led to double-digit increases in unit costs for two of the most commonly used pain therapy treatments among Medicaid beneficiaries – lidocaine and oxycodone/acetaminophen. The 12.3% increase in unit cost overall for this therapy class offset a 3.2% decrease in utilization despite a 97.5% generic fill rate for this class.

Specialty Trend Drivers

Spending on specialty medications increased 35.8% in 2014, due almost entirely to increases in unit cost. When we look at the top three specialty therapy classes – hepatitis C, HIV and inflammatory conditions – together, they contributed 54.7% of total specialty PMPY spend.

Total trend for HIV medications increased by 11.0%, almost exclusively from an increase in unit cost. Although generic availability in this class continues to increase, there is not a significant impact on cost because a constantly changing pipeline is needed to address mutations in virus strains that cause resistance to drugs. Additionally, older HIV drugs that may have generic equivalents must be taken several times a day in combination with other drugs, and newer treatments that combine multiple medications into one-dose form offer more convenient dosing regimens.

Components of Trend for the Top 10 Medicaid Specialty Classes Ranked 2014 PMPY Spend 

The top 10 specialty drugs accounted for 44.5% of PMPY spend for all specialty drugs in 2014. Sovaldi® (sofosbuvir) captured 17.6% of PMPY spend for all specialty drugs in 2014 – more than triple the PMPY spend for the second-most-expensive drug, Humira® (adalimumab), which had almost three times the utilization of Sovaldi in 2014.

Top 10 Medicaid Specialty Therapy Drugs Ranked By 2014 PMPY Spend 

Three HIV medications captured spots in the top 10: Atripla® (efavirenz/emtrivitabine/tenofovir), Truvada® (emtricitabine/tenofovir) and Viread® (tenofovir), while the oral MS treatment, Tecfidera® (dimethyl fumarate), had the second-highest trend increase at 247.7%. Most of Tecfidera’s triple-digit trend increase came from a 216.3% increase in utilization which is likely attributable to the added convenience it provides as an oral medication rather than the traditional, injectable treatments.

Controlling Costs

As states continue to try to manage the cost of care for Medicaid, interest in the use of managed care remains high. Many states that chose Medicaid expansion had previously used some form of managed care to control the costs of managing enrollee benefits. We encourage health plans to review and consider some of the below best practices approaches taken in the marketplace when trying to manage their drug costs.

These best practices include:

  • Tighter management for high-priced specialty medications including updated prior authorization and treatment guidelines, which help ensure the right patients receive the right treatments.
  • Use of an exclusive specialty drug distribution channel, such as Accredo, which can improve patient outcomes through greater medication adherence while reducing costs. As an example of demonstrated improvements, Accredo’s high-touch pharmacy care helped improve medication adherence for patients with cancer by 16 percentage points and among patients with multiple sclerosis by 32 percentage points.
  • Implementation of additional prior authorization and utilization management guidelines, such as those we saw used in approving the new Hepatitis C medications – including but not limited to requiring viral load testing for continued authorization of medication, split-fill dispensing, 14-day dispensing, evaluation of illegal drug use, and re-treatment limits – all of which help reduce waste and abuse.
  • Smart formulary management that preserves patient access and choice while helping payers obtain fair and affordable pricing.  As an example, within our Commercial population, Express Scripts excluded a handful of “me-too” products from the Express Scripts National Preferred Formulary in 2014 and 2015 which created the necessary leverage to negotiate more effectively with manufacturers and ultimately achieve lower drug prices for the clients and patients we serve.

A full therapy class review, including impact of drug trend by age group, is available in the 2014 Express Scripts Drug Trend Report.

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